The SplitTrader.com Newsletter Monday 04/16/01 1 of 1
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In This Newsletter:
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Market Commentary | A Mixed Start
Definition of the Day
Monday's Split Announcements - PPDI
Tuesday's Expirations
Tuesday's Play-of-the-Day | EQT
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Market Commentary
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A Mixed Start
Technology stock traders were a bit nervous today. The NASDAQ
(COMPX) retreated 51.86 points and closed at 1909.57 ahead of what
will be a very busy week of earnings reports for the technology
sector.
After four straight up days and following one of the best
percentage gaining weeks on record, NASDAQ traders were prescient
in their reluctance to buy stocks because Cisco Systems
(NASDAQ:CSCO) hit the market with a bombshell after the close.
The world's largest router manufacturer and significant technology
bellwether warned the investment community to expect worse than
anticipated third and fourth quarter results. Cisco Systems
claims that current US economic woes have spread throughout the
world, and, as a consequence, the company will not only miss its
earnings but will also have to slash 8,500 jobs.
Cisco believes that revenues will likely be about $4.69 billion in
the third quarter. Analysts had expected revenues to be $5.95
billion and earnings to come in at 8 pennies. According to the
company, earnings are now expected to be in the very low single-
digit range. Cisco closed the regular session down $0.78 to
$17.20. After hours has seen some aggressive selling and CSCO is
currently trading at $15.75.
The NASDAQ volume leaders were mostly in the red. Microsoft
(NASDAQ:MSFT) fell $1.39 to $60.79, Intel (NASDAQ:INTC) dropped
$1.82 to $26.30. JDS Uniphase (NASDAQ:JDSU) retreated $1.89 to
$19.90 and Juniper Networks (NASDAQ:JNPR) suffered profit taking
to the tune of $2.00 and closed at $48.38.
Plug Power (NASDAQ:PLUG), an alternative residential power
generation company, enjoyed a huge day as it gained $3.82 to
$18.75. Another NASDAQ winner was Quest Software (NASDAQ:QSFT),
which released a new product and gained $2.87 to $27.40.
As for the Old Economy, the Dow Jones Industrials (INDU) did
manage a modest gain of 31.62 points to 10,158.56. NYSE volume
was a very light 896 million shares. Decliners numbered 18 for
every 13 advancers on the NYSE.
Some of the NYSE winners include E.W. Blanch Holdings (NYSE:EWB)
which gained $5.13 to $13.15 after agreeing to be acquired by the
British reinsurance entity, Benfield Greig Group Plc, for $13.50
in cash. Dow component, 3M (NYSE:MMM) enjoyed a solid day as it
rose $2.75 to $110.48. Anadarko Petroleum (NYSE:APC) was another
notable gainer, as it picked up $2.96 to $68.31. A very strong
energy group saw ExxonMobil (NYSE:XOM) rally $2.55 to $84.55.
The most active list over at the NYSE saw some declines among
technology stocks. Northern Telecom (NYSE:NT) dropped $1.35 to
$15.25, Micron Technologies (NYSE:MU) lost $1.91 to $44.50, Texas
Instruments (NYSE:TXN) fell $2.44 to $33.01 and Corning (NYSE:GLW)
shed $1.55 to $22.40.
The pressure upon some of the biggest names in the NASDAQ caused
the S&P 500 (SPX) to drop 3.80 to 1179.70. The S&P 100 (OEX)
dropped 2.26 to 606.00. The NASDAQ 100 (NDX) was down a
disappointing 64 points to 1650. The Russell 2000 (RUT) was
unable to buck the trend as it dropped 4.12 to 450.90.
The Splittrader.com Play List was bolstered by a solid gain in oil
services concern BJ Services (NYSE:BJS), which picked up $2.24 to
$76.50. Arch Coal (NYSE:ACI) continued its strong momentum and
managed a new high with a gain of $1.53 to $33.78. Another nice
performer on our list was Equitable Resources (NYSE:EQT), which
picked up $1.57 to $76.48.
The AMEX Oil and Gas Index (XOI) was one of the strongest indices
with a gain of 13.70 to 563.28. Much of the gain can be
attributed to a Crude Futures rally of 54 pennies to $28.79 a
barrel following a refinery explosion in the U.K. The
Pharmaceutical Index (DRG) managed to finish with a modest gain of
1.76 to 386.36. On the downside, we saw the PHLX Semiconductor
Index (SOX) suffer profit taking of 21.15 points to 576.75. The
Biotechnology Index (BTK) was down 18.62 to 495.47.
Treasury prices continued to slump as the investment world focuses
upon this week's numerous corporate earnings reports. The 10-year
Treasury note dropped 23/32 to a yield of 5.275% and the 30-year
bond plummeted 1 7/32 to a yield of 5.685%. Some of the decline
can be attributed to nervousness ahead of tomorrow's Consumer
Price Index report, which is expected to show a rise in inflation
of 0.1% overall and 0.2% at the core.
After hours trading has been understandably robust following Cisco
Systems (NASDAQ:CSCO) warning. Additionally, we have seen plenty of
activity following several earnings reports.
Vitesse Semiconductor (NASDAQ:VTSS) announced that it met
consensus earnings estimates of 10 cents. However, the Company
missed consensus revenue estimates of $126 million by just over $4
million. VTSS dropped $1.59 to $24.16 during the regular session
and is currently trading at $21.99 in after hours trading.
There is some surprisingly good news from Computer Associates
(NYSE:CA). The major software firm pre-released its fourth
quarter results and said that it will likely beat consensus
estimates for 43 cents of profits by 4 pennies. Obviously, this
is good news on the technology stock front but it may not be
enough to balance the Cisco news. CA is currently halted in after
hours trading and closed the regular session down $0.23 to $29.59.
Tomorrow's trading on the Dow Jones Industrials (INDU) will likely
be dominated by the earnings releases of several components as
well as the CPI numbers. In fact, the INDU will see nearly half
of its components announce their earnings by the end of the week.
It will certainly be interesting to see what affect, if any, the
Cisco news will have. It will be important for the INDU to stay
above the critical 10,000 support. The INDU has been trending
nicely higher in the short term and if earnings come out as
expected, do not be surprised if the INDU climbs above the 10,250
resistance and eventually test 10,500 by the end of the week. The
MACD remains in a solid ascent and the RSI has plenty of room
before this rally would be hindered by an overbought condition.
The NASDAQ (COMPX) may suffer severely tomorrow on the heels of
the Cisco news. Many pundits are already coming out and saying
that last week was a "sucker" rally. Whether this is true or not
is irrelevant. What does matter is the fact that there is still
an incredible amount of fear and massive profit taking could
ensue. Tomorrow is an important day for the NASDAQ. If the index
can hold on and only drop modestly and show some resiliency with a
late day comeback, the bear squeeze will probably resume heading
into Friday's options expiration.
The NASDAQ should find some support at last week's low of 1710. A
drop below this level could result in some vigorous selling. If
we see panic selling following the Cisco news, look for the NASDAQ
to bounce off 1600. There is a chance that the NASDAQ can brush
off the news. The MACD is still bullish and the RSI is not even
close to an overbought condition. If the drop is mild, look for
the NASDAQ to attempt a rally to 2000 by the end of the week. If
the NASDAQ can close above 2000, many bears may throw in the towel
and we could see a quick rally to
2200.
It is important to reiterate that taking quick profits in this
market is not a bad idea. Clearly, one should be exceedingly
disciplined about placing and executing stops.
Good luck! And may all of your trades be winning ones!
Jim Booth
Research Analyst
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Definition of the Day
=====================
Odd Lot Theory
The Odd Lot Theory is based on the belief that the individual investor is
usually wrong, or guilty of poor timing.
For the complete definition, please go to:
http://www.splittrader.com/glossary/viewglossary.asp?glossaryid=252
============================
Monday's Split Announcements
============================
Monday, April 16, 2001, 6:20 PM EST
PPD Announces Stock Split and Stellar Earnings Results
After Monday's closing bell, biotech service provider
Pharmaceutical Product Development, Inc. (Nasdaq:PPDI) reported
first quarter results for period ending March 31, 2001 and
announced a 2-for-1 stock split of its common shares.
Diluted earnings per share of $0.56 (pre-split) increased 110
percent over the same period of last year, with net revenue
almost 31 percent higher to $107 million. An event that carried
substantial positive financial impact for the company was the
sublicensing of dapoxetine to the Alza Corporation. Additionally,
new authorizations for the first quarter increased by over 24
percent for a total of $165 million.
PPD also announced a 2-for-1 stock split for shareholders of
record as of April 27, 2001, payable as a 100 percent stock
dividend on May 11, 2001; the stock is expected to trade on a
split-adjusted basis on May 14, 2001. The Company currently has
25.7 million shares outstanding, 20.6 million in the float, and
95 million shares are authorized. This marks PPD's first-ever
stock split.
For the complete announcement, please go to:
http://www.splittrader.com/announcements/041601_1.asp
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Tuesday's Expirations by Payable Date
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None
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SplitTrader.com Plays
=====================
The PLAY LEGEND:
SplitTrader.com Play Recommendations.
Play-of-the-Day is our number one play recommendation for the
FOLLOWING trading day.
You will see:
Stock Symbol, Company Name, Closing Price, Change for the Week.
Following the play you will find: Picked at Date and Change Since
Picked
Terms:
BoD = Board of Directors meeting
ADV = Average Daily Volume
dma = daily moving average
At the SplitTrader.com website, we have comprehensive profiles
for each stock that we are playing or have played in the past, as
well as hundreds of others. Please take the time to visit the site
to view the profile of the stock(s) you wish to learn more about.
==================================================================
Play of the Day (For Tuesday)
Monday, April 16, 2001
=============================
EQT - Equitable Resources, Inc. $76.48 +1.57
Thursday's Comment:
Equitable Resources has cooled off over the past two sessions
after hitting an all-time high of $75.63 earlier in the week. On
Thursday, shares of EQT fell to an intra-day low of $73.95 before
bouncing back to close at $74.91 on volume of 138,000 shares. The
energy sector has lost some of its momentum and EQT was ripe for
profit taking so we are not surprised to see it take a step back.
However, the stock remains in a firm upward trend so it could
break out to new highs as we approach its earnings release on
April 20th before the bell. From a technical standpoint, EQT has
support at Thursday's intra-day low of $73.95 with additional
support at $72.47, the 10-dma. Resistance has come in at the all-
time high of $75.63 and then possibly $77 or $78. Traders may
consider starting new plays on a bounce off of $73.95 or a
breakout above $75.63 on volume of at least 100,000 shares by
noon. We are keeping our stops at $72.25, just under the 10-dma.
Monday's Update:
Over the past two weeks, Equitable's stock has been able to rally
more than $7.00 to close Monday at $76.48, an all-time closing
high. More importantly, though, we think that Equitable could
continue to climb higher thanks to continued strength in the
energy sector and strong technical indicators on the stock. In
fact, both the MACD and On-Balance Volume are displaying strong
momentum buy signals. At current levels, Equitable appears to
have caught support at the psychologically-significant $75.00,
with additional support coming from the 10-day moving average at
$72.63. At this point, there is no obvious resistance until $80.
Traders considering a position in Equitable should look for strong
volume, 100,000 shares or more traded by noon EST, on a move
through Monday's intra-day all-time high of $76.90 or a bounce off
support at $75.00 before placing their trades.
Picked on March 27th @ $67.20
Change since picked +9.28
Stop Loss @ $72.25
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